Judgment:
1. The appellants are a Public Sector Undertaking and have the necessary clearance from the Committee on Disputes to prosecute this appeal. They are manufacturers of power transformers and spares thereof.
Apart from the manufacture of transformers, the appellants are also engaged in the repair/rectification of transformers. Whenever the Double Paper Coated (DPC) copper coils in the transformers supplied to customers got burnt for any reason, during the relevant period, the appellants replaced the same with fresh DPC copper coils.
Whenever such replacements were supplied to the customers, they (appellants) paid duty on the goods treating them as transformer parts under Chapter Heading 85.04 of the Central Excise Tariff Schedule. The department took the view that such copper coils were rightly classifiable under Sub Heading 8544.90 as insulated wire and not under Heading 85.04 as part of transformer. Accordingly, the department took the stand that differential duty amounting to Rs. 12,75,292/- was liable to be paid by the appellants on the DPC copper coils removed from their factory to customers during the period 31.1.95 to 28.2.99. During the period 30.3.99 to 26.4.99, the appellants had cleared, without payment of duty, transformers to Indira Gandhi Center for Atomic Research (IGCAR, for short), Kalpakkam, claiming the benefit of Notification No. 10/97-CE Dated : 1.3.97, which exempted from payment of excise duty, scientific instruments, apparatus and equipments (including spares and accessories) cleared to research institutions for research purposes.
The department took the view that the transformers supplied by the appellants to IGCAR could not be described as scientific instruments, equipments or apparatus and, therefore, the benefit of the Notification was not available to them. The amount of duty which, according to the department, was liable to be recovered from the appellants in respect of the transformers supplied to IGCAR during the above period was Rs. 4,78,880/- A show-cause notice was issued on 10/1/2000 demanding the above duties, invoking the extended period of limitation on the basis of alleged misdeclaration and suppression of facts. The show-cause notice also proposed to levy interest on duty under Section 11 AB as well as to impose penalties on the appellants under Section 11AC and Rule 173Q. The proposals were contested. The adjudicating authority justified the invocation of the extended period of limitation and confirmed the demands of duty against the appellants. It also imposed penalties of Rs. 17,54,172/- and Rs. 2,00,000/- on them under Section 11AC and Rule 173Q respectively, Interest on duty was also demanded under Section 11AB and the same was directed to be quantified by the Range officer concerned. In the appeal preferred by the assessee against the order of adjudication, the Commissioner (Appeals) upheld the demands of duty with interest, but set aside the penalty under Section 11AC and reduced the penalty under Rule 173Q to Rs. 1.5 lakhs. Aggrieved by the demands of duty and the penalty under Rule 173Q, the party has filed this appeal.
2. Heard both sides. Ld. Chartered Accountant for the appellants has challenged the demands of duty both on merits and on limitation. On merits, he has relied on PUNJAB STATE ELECTRICITY BOARD VS. COLLECTOR OF CENTRAL EXCISE, CHANDIGARH 1995 (76) ELT 313 (TRIBUNAL) wherein it was held by this Tribunal that the coils fabricated from aluminium and copper wire's were not marketable and hence not excisable. It has been further submitted that the said decision has been affirmed by the Hon'ble Supreme Court vide 1996 (83) ELT A.106. Reliance has also been placed on CCE, INDORE VS. GWALIOR ELECTRICALS INDUSTIES 2001 (94) ECR 531 (TRIBUNAL) wherein, following the decision in PUNJAB STATE ELECTRICITY BOARD VS. CCE, CHANDIGARH (supra), the Tribunal held that conversion of DPC wire into LV/HV coil did not amount to 'manufacture'.
Therefore, ld. Chartered Accountant contended that the demand of duty on the DPC copper coils cleared by the appellants to their customers during the relevant period of dispute was not sustainable.
3. Regarding the demand of duty on the transformers supplied to the IGCAR during the relevant period, ld. Chartered Accountant has submitted that the goods were admittedly used by IGCAR (a research institution under the Atomic Energy Department of Government of India) and this fact was duly certified by the Director/Deputy Secretary to Government of India, Department of Atomic Energy, who was competent to issue such certificate in terms of Notification No. 10/97-CE ibid.
Transformers used by a Centre for Atomic Research under the Department of Atomic Energy, for research purposes, cannot, by any stretch of imagination, be held to be anything other than scientific instrument, equipment or apparatus. Therefore, according to ld. Chartered Accountant, the benefit of exemption under the Notification was available to the transformers supplied to IGCAR during the relevant period.
4. Ld. Chartered Accountant has also pleaded time-bar against the demands of duty. He submitted that all the clearances were made only after filing the necessary classification list/declaration under Rule 173 B and no material fact whatsover was concealed from the department.
The allegation of suppression/misdeclaration of facts is baseless and hence the extended period of limitation is not invocable. Therefore, according to the Chartered Accountant, the entire demand is barred by limitation. It has also been argued that the penalty of Rs. 1.50 lakhs was wrongly sustained by the Commissioner (Appeals) in spite of his own finding that the appellants had no intention to evade payment of duty.
5. Ld. SDR has referred to the modus operandi of the appellants in respect of DPC copper coil and has submitted that the appellants were not supplying the core of transformer and, therefore, the insulated wire in coil form, supplied without the core of transformer, could not be considered as a part of transformer. The DPC copper coil supplied by them was only insulated wire (conductor) classifiable under Sub-Heading 8544.90. The appellants had misdeclared to the department that they were only replacing coils. Therefore, the extended period of limitation was applicable to the case. Ld. SDR has relied on the following decisions of the Tribunal :- (i) MAHARASHTRA WIRE INDUSTRIES VS. CCE, BOMBAY-II 2000 (122) ELT 244 (T) It has also been submitted that the Tribunal's decision in D.K.Electricals industries (supra) has been upheld by the Hon'ble Supreme Court vide 2002 (144) ELT A.296. Regarding the demand of duty on transformers, ld. SDR has reiterated the findings of the original and first appellate authorities.
6. We have given careful consideration to the submissions made by both sides. The Revenue has contended that the DPC copper coils are classifiable under sub heading 8544.90 as insulated wires. But it has been held by this Tribunal in the case of CCE, INDORE VS. GWALIOR ELECTRICAL INDUSTRIES (supra) that conversion of DPC wires into coils will not amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. In that case, M/s. GWALIOR ELECTRICAL INDUSTRIES were manufacturing power transformers and parts thereof and also undertaking repairs of old transformers, for which they were using coils made from DPC wires. Following Punjab State Electricity Board (supra) and East India Transformers & Switch Gears Pvt. Ltd. Vs. CCE (1989 (43) ELT 516 & 1990 (47 ELT 442), the Tribunal held that neither the conversion of DPC wires into coils nor the repair of transformer amounted to 'manufacture'. It was accordingly held that the DPC wires used for repairing old transformers were not chargeable to duty of excise. It was, however, ordered in that case that, if the assessee had availed modvat credit under Rule 57 A of the Central Excise Rules, 1944, they had to discharge duty liability on the DPC wires to that extent as per the Tribunal's Larger Bench decision in the case of CCE, VADODARA VS. ASIA BROWN BOVERI LTD 2000 (92) ECR 484 (T). In the case of PUNJAB STATE ELECTRICITY BOARD (supra) it was held as under:- "A coil comes into existence as a coil only when the wire is would around the core for the required number of turns. In BHOR INDUSTRIES LTD. VS. COLLECTOR 1989 (40) ELT 280 (SC), the Supreme Court had laid down the test that it is necessary to find out whether articles "are known in the market as separate, distinct, identifiable commodities" in order to determine whether they are marketable.
Applying this test, it becomes clear that the coil cannot be considered marketable. One cannot go and buy a coil as one could buy a transformer. Further, a coil, even if would according to a customer's order does not emerge as a commodity by itself. It comes into existence as a part of a transformer for the reason that the wire is would around the core of the transformer. Quite apart from the questions as to manufacture that would arise after considering this process, it is clear that in this transformation from electrical wire into a part of transformer there is no moment in time when the coil itself exists independently as a coil. Thus, the coil does not exist at any time as a marketable commodity." The DPC copper coils in question squarely covered by the above ratio and, accordingly, these coils cannot be held to be chargeable to duty.
When decisions on excisability of identical goods are available, we need not consider any decision on excisability or classification of different goods. Hence Maharashtra Wire Industries (supra) cited by ld.SDR, wherein the question considered was classification of plastic-insulated galvanised wire rope used in railway signalling system, is not relevant.
7. Insofar as the demand of duty on transformers supplied to IGCAR during the material period is concerned, we have to examine the relevant Notification. Notification No. 10/97-CE ibid granted exemption to scientific equipments, instruments and apparatus used by research institutions working under the Atomic Energy Department, Government of India. The Revenue has no case that IGCAR is not a research institution under the AED or that the said institution did not use the transformers in question for research purposes. The transformers were actually cleared to IGCAR only on the basis of the requisite certificate issued by the Dy. Secretary to Government of India, AED, which certified that the transformers were to be used for research purposes by IGCAR, Kalpakkam. A transformer working on scientific principles must squarely fall in the category of scientific equipments, apparatus, instruments, etc. The transformers in question, therefore, satisfied the conditions of the Notification. The benefit of exemption under the Notification was, therefore, clearly admissible to them.
8. We have found that both the demands of duty are unsustainable. No other issue survives. Therefore, we set aside the impugned order and allow this appeal.